Medical Necessity as a Fraud Theory

The US Department of Justice recently announced settlement of False Claims Act 9 (FCA) allegations against Extendicare Health Services, Inc. (“Extendicare”) and its subsidiary Progressive Step Corporation (“ProStep”). The FCA allegations stemmed from allegations that Extendicare billed Medicare and Medicaid for materially substandard nursing services, as well as medically unreasonable and unnecessary rehabilitative therapy services.

Although this is not the first case of its kind, it is certainly the largest. In the settlement, Extendicare agreed to pay $38M to settle the FCA allegations. This case and those that have preceded it demonstrate the government’s increasing willingness to proceed with FCA allegations relating to the necessity and appropriateness of care.

Traditionally, medical necessity has been a difficult theory to prove the requisite intent, given that medical necessity is an issue that turns on the subjective judgment of the provider. Unfortunately, such analysis has been removed (at least in a post payment analytical scenario) from physicians and, instead, allegations of medically unnecessary care are often leveled on the basis of documentation content deficiencies.

No doubt, CMS and local contractors publish guidance regarding appropriate documentation content. Such guidance, however, should be used to identify the type of information that is helpful in making a clinical determination of necessity. Strict compliance with such guidance should not, however, be used as a proxy for performing the actual clinical analysis. Regardless, under this approach it is common for a Zone Program Integrity Contractor or local Medicare Administrative or Program Safeguard contractor to conclude that because the documentation was missing an item of information, the service was not medically necessary and therefore not compensable. Such an analytical approach would suggest that merely ‘filling in the blanks,” so to speak, justifies a determination of necessity. Clearly, such an approach would be inappropriate. Similarly, denials on the basis of necessity are not appropriate because something is missing.

The clinical appropriateness of a service is an issue that exists absent documentation. Placing a stent in a patient with a blockage is appropriate and necessary care with or without a note. The documentation merely provides us with relevant evidence so that the carrier can validate the basis for the provider’s clinical decision-making.

Notwithstanding the above, contractors are applying a “missing documentation content = medically unnecessary care” standard. Because the government has demonstrated an increasing willingness to proceed with FCA allegations on the basis of medical necessity, providers should exercise additional diligence relative to ensuring that the content of their documentation fully complies with the content guidance published by CMS — not because it guarantees that services will be deemed medically necessary, but because they will be deemed medically unnecessary if you don’t.

Mr. Miscoe, JD, CPC, CASCC, CUC, CCPC, CPCO, CPMA has over 20 years of experience in healthcare coding and over sixteen years as a compliance expert, forensic coding expert and consultant. He has provided expert analysis and testimony on a wide range of coding and compliance issues in civil and criminal cases and his law practice concentrates exclusively on representation of healthcare providers in post-payment audits as well as with responding to HIPAA OCR issues. He has an extensive national speaking background and has been published in numerous national publications on a variety of coding, compliance and health law topics.

Mr. Miscoe, JD, CPC, CASCC, CUC, CCPC, CPCO, CPMA has over 20 years of experience in healthcare coding and over sixteen years as a compliance expert, forensic coding expert and consultant. He has provided expert analysis and testimony on a wide range of coding and compliance issues in civil and criminal cases and his law practice concentrates exclusively on representation of healthcare providers in post-payment audits as well as with responding to HIPAA OCR issues. He has an extensive national speaking background and has been published in numerous national publications on a variety of coding, compliance and health law topics.